e.Digital article from SD ...copied from RB..better than the TSC mishmash, IMO
Hope y'all don't mind the multiple posts. I figure the weekend is the
time to get this stuff out......
Not interested in EDIG? Click on past
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By Mike Drummond
STAFF WRITER
July 24, 1999
POWAY -- Someday soon, people may be able to harvest news articles, e-mail and other bits of text off the Internet and listen as this information is read aloud from portable devices.
The first steps toward that ambitious goal are happening here, inside the offices of e.Digital Corp.
Giant chipmaker Intel is paying the Lilliputian Poway company for research and development costs aimed at making new speech-to-text, text-to-speech gizmos. The project, which began last year but stalled when the companies dumped a third-party technology partner in favor of another unnamed firm, remains hush-hush. The companies won't even reveal drawings of what the device looks like.
Still, Skip Matthews, a senior project development manager for Intel's Memory Components Division, coyly hinted at the project's capabilities.
"What if you had a device that could read The Wall Street Journal to you while you're in your car?" he said, declining to elaborate.
(Matthews must have liked what he's seen at e.Digital. He announced his retirement from Intel effective Aug. 1 to become a member of the Poway company's board.)
E.Digital's quiet work with the world's largest computer chipmaker may bode well for a company that has struggled for more than a decade to turn a profit.
After laboring in red ink and relative obscurity, the rechristened e.Digital -- formerly Norris Communications -- has signed deals that have lifted the company's profile, as well as its once-anemic stock. The partnership with Intel has helped. And while the company still operates at a loss, e.Digital's fortune may be changing:
A two-year relationship with Lanier Worldwide bore fruit recently when Lanier announced an initial $3 million purchase order for e.Digital's line of digital recorders for doctors. Successors to the company's first-generation "Flashback" recorders, which flopped commercially earlier this decade, the devices can scan bar codes on patient files and zap recorded notes directly into corporate computers.
In April, IBM selected e.Digital as one of five inaugural members of the VoiceTIMES alliance, an initiative to develop standards for new breeds of hand-held mobile devices. The other partners are Intel, Norcom Electronics, Olympus and Philips.
That same month, Lucent Technologies selected e.Digital to work on a new type of device capable of playing digital music downloaded off the Internet.
The player, which e.Digital hopes to have ready for this Christmas season, is designed to play music with Lucent's proprietary Enhanced Perceptual Audio Coder format, designed to thwart unauthorized copying.
However, the device also will be able to play music in the controversial MP3 format, a technology that shrinks CD sound files without major loss of audio quality.
Lucent and e.Digital have yet to name a manufacturer that will build the new consumer product.
The timetable for the digital music device is "aggressive," concedes Fred Falk, e.Digital's 43-year-old president and chief executive. But it's doable, he insists.
Falk's optimism is fueled by his belief that the world is ravenous for new breeds of portable devices, and that major manufacturers will be eager to feed the hunger.
Specialized speech-recognition and music over the Internet "are two of the hottest technologies out there," Falk says.
E.Digital, he notes, has a foot in both camps. The company's crown jewel is its patened Micro OS, a stripped-down mini-operating system designed to run on small devices that use so-called flash memory chips -- postage-stamp sized memory storage cards that many of the newer digital music devices are or will be using.
While e.Digital is a darling among investors on Internet chat rooms, some critical observers are troubled that the company can't or won't show off a prototype player and that it hasn't named a manufacturer this late in the game.
Jim Seymour, president of the consulting firm Seymour Group, recently wrote in TheStreet.com Web site that e.Digital may have superior technology, but company executives are delusional if they think a variety of digital music formats will coexist.
Seymour believes MP3, though audibly inferior to others, will be the dominant standard. He evoked the VHS vs. Betamax scenario, where VHS won because it established market share despite its shortcomings.
"If e.Digital does have the technically superior technology and approach, but is (a) not focused on customers' requirements, (b) late to market and (c) unfocused, then the mean-spirited ghost of VHS-Betamax may indeed hover over this innovative company," Seymour wrote.
Earlier this decade, the company's Flashback digital recorder -- the device that was supposed to doom hand-held tape recorders -- never gained critical mass. Two years ago, the company shed its manufacturing business and targeted developing technologies for equipment manufacturers.
E. Digital is still not showing a profit. The company has lost money -- $2.7 million in 1998 alone -- over the past three years and likely will continue to do so for at least the near term, according to its most recent annual report, filed last month.
Revenues fell 60 percent to $426,350 in fiscal 1999, in large part because the company sold the last of its Flashback recorders to Sanyo, ending a revenue stream by attrition.
Yet e.Digital says it has one thing now that it didn't have even a few months ago -- credibility.
The deals with Intel, IBM, Lucent and Lanier, "gave us credibility that we were lacking for a long time," said Robert Putnam, long-time partner with e.Digital founder Elwood "Woody" Norris and the company's senior vice president.
Indeed, e.Digital's stock, which traded over the counter at just 5 cents a share in January, jumped to more than $3 a share last month. The share price has since settled to just over $2.
Norris, 60, has seen the $3,000 worth of shares he bought seven months ago shoot to more than $106,000, an increase of more than 3,400 percent.
It may be no small coincidence that the stock upswing and the deals occurred after Norris abdicated control of day-to-day business operations. It's no secret that Norris -- a creative inventor with 19 domestic and more than 100 international patents under his belt -- is no genius when it comes to management.
"He'll be the first to tell you he's not in the business side of it," said the 40-year-old Putnam.
Indeed, Norris admits he's never enjoyed management duties: "My role has been better in the lab."
And so over the last few years, Norris has slipped out of the executive's chair and into a lab coat, working more or less behind the scenes at e.Digital, American Technology Corp. and Patriot Scientific Corp. -- three companies he helped found.
Not surprisingly, the stock prices of American Technology and Patriot Scientific have also bounced back up recently. In mid-July, American Technology was trading at $7.371/2, while Patriot was at 61 cents, above its 52-week low of 25 cents.
"One of the things we don't do around here," Norris says, "Is give up."
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